This led by Xue Yan, two common

This paper reviews
different financing methods through the use of models that can be initiated and
proposed for toll road construction projects. This review includes an
assessment of an article published by Xue Yan from the Journal of Management in
Engineering/Volume 33 Issue 4 in July of 2017 and is titled, “Financing
Decision Model for Toll Roads: Balancing Economic and Public Attributes” (Yan, 2017). In the research
led by Xue Yan, two common aspects are considered when working with toll roads.
The first aspect is an economic side and the second is a public side.  A quantitative decision model for selecting
the best financial method is used in this journal article in order to balance
these attributes and come up with the best solution for building and financing
future toll roads. In the following paragraphs I will discuss the major events
the article highlights in order to come up with the best financial method for
toll road construction, my stance on one potential solution to the matter, and
how this research and documentation can be applied to my career in the
construction industry.

 

To
begin, I will focus in on the economic side of toll road construction since it
plays a crucial part in effectively
selecting the optimal financial method, and helps to balance the two attributes
of a toll road. In the
article it states, “As the monetary
form of the economic attribute, the economic benefit of a toll road has been
quantified by many measures” (Yan, 2017). This relates
directly to my career because it focuses in on the various economic measures we
learned in class. These measures include the net present value, profit margin,
internal rate of return, cost analysis and the least present value of revenue.
All of which were calculated in order to assess how toll road construction
projects should be carried out in the future. However, to put things into
perspective with my career, I believe that the best possible economic measure
out of the ones I listed above would be the data presented from benefit-cost
analysis calculations, after learning it in class this semester. To back up
this assumption, the article expressed that “Cafiso and Agostino used benefit–cost
analysis (BCA) to compare the benefits and costs, measured in monetary units,
of different roadways” (Yan, 2017). In order to
balance out the economic attribute with the public attribute, the cost must be
controlled even if it neglects to increase social benefits of the project.   

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The public side to
toll road construction also plays a huge role in selecting the best financial
method to use for projects. For example, the article states that, “many roads
still face issues of too-high toll rates and too-long toll periods, which
results in losses for the public attribute” (Yan, 2017). However,
even with these setbacks, toll road financing is still a phenomenal funding
mechanism. Toll road projects have high public benefit and high investment
returns. Therefore, when you look at the cost benefit analysis when putting a
toll road in that is parallel to an existing road, the success of the project
will force the public to accept such extensive projects that may cost a
significant amount of money. If the toll roads were free like some countries
offer, the financial setbacks could be devastating since the public attribute
of the toll road would no longer balance out with the economic attribute.

 

Furthermore, upon
discussing the major events this article highlights, unfortunately there are
multiple solutions on which financial method is best for toll road construction.
This is due to certain limitations in research that still need to be discussed.
Despite the limitations, another piece of information from the article states
that, “The operational
coefficient and the public welfare coefficient could change the price and the
capacity of a toll road, which would alter the attributes of the toll road.” (Yan, 2017). I agree
whole-heartedly with this point because not all projects come with the same
circumstances. This piece definitely relates to my career because after having
two internships, the first project I was on did not even compare to the second.
Positive and negative outcomes are always going to be associated both on the
financial and operational side of projects. Therefore, from personal knowledge
I believe that the best financial method in most cases would be to adopt the
methods of a public private partnership. Under this method, the projects yield
would just have to stay underneath the MARR like we talked about in class and
all methods of the PPP could be adopted. In order to further prove my point the
article states, “the government not only transfers all of
the project responsibility to private parties but also shares interests and
risks with the cooperative parties through project support” (Yan, 2017). This then
provides a direct line of communication in the project and allows for some of
the risk to be mitigated in the very beginning. Without proper communication
and planning, no project can succeed. Multiple countries including the United
States, India, and Austria have adopted this method for use in toll road construction
and have been very successful.

 

            Even though this research on toll
road construction does not directly correlate to my career, it applies multiple
concepts that I have learned in class this semester. This article has also shown
me that there is potential for multiple risks in financial methods no matter
what type of project it may be. In addition, by using the cost benefit analysis
calculation a lot can be told before the project has begun. It is always a good
idea to stick costs side by side in order to visualize what the numbers could
look like given two scenarios. Next, the article talked about multiple
calculations/ratios and methods that were used in this research in order to
provide backup data, which we were taught in class and tested on so it was very
interesting to see how these calculations worked in real life scenarios. As I
head into my full time career, I will take with me what I learned in this
article. Lastly, I will evaluate both public and economic attributes when
trying to decide what financial impacts could arise on projects I will be
working on in the future. All in all, this article provided many financial
points and was a great article to read.